How do I purchase an annuity?

Tintagel

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I have a separate AVC lump sum invested apart from my DB pension.

How do I go about purchasing an annuity using this?

Is there such a thing as a "list" of annuities that I chose from and how do I choose the right one that is performing well, has reduced fees and if I approach an independent broker, how do I know that I won't be steered in the direction of a big commission for him?
 
Option A: a fee based Broker (and one who gets comission) and compare the results they produce.
Option B: Contact the different providers directly and ask
Option C: Check if a government agency has a list of providers (Central Bank or the Pensions Authority)
 
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Option B: Contact the different providers directly and ask

Are these available online? Sorry I know I can Google this but I just thought that there might be a list of Annuity providers together with fees/costs/performance/reviews etc online.
 
Couldn't find a list online either - the Central Bank or the Pensions Authority might have one or could compile one.
 
There's a summary of the options/terms on annuities here. It's an old post that I did but still relevant.

The market for annuities is pretty limited and the main players tend to be Aviva, Irish Life, New Ireland and Zurich. Other companies 'dabble' from time to time but most of them just offer annuity rates to folk that have policies maturing with them.

Buying directly from the provider doesn't guarantee the 'best' rate. If you need advice on the purchase you have to pay for it. If you don't need advice (execution only), you'll probably be able to negotiate a fee or reduced commission structure from a discount broker - you have to tell the broker what company you want to buy the annuity with and what options you want with it.

All annuity rates quoted will be current so there's no point asking what rates were like 5 years ago or will be like in a few months time.
 
Thanks. When you purchase an annuity are you purchasing a stock market type investment or a deposit type investment. Are there such things as high risk, medium risk and low risk annuities? Does a person purchasing an annuity choose which option?
 
An annuity is a guaranteed income for life. You give the capital to the Life Company and in return they guarantee a fixed income (or an indexed income). Investment risk is not an issue for you.
You simply decide what type of annuity, e.g.
- a single life annuity payable for as long as YOU live (level or indexed)
- an annuity payable as long as you live but continuing to a surviving spouse on your death
- there are also optional benefits such as a minimum guarded payment period - eg 5 years

The essential point with an annuity is that you hand over the capital in return for a guaranteed income for life. The real "risk" is the longevity one. If you live to 100+ you will do well, if you die after say only 10 years then the Life Co. gain. So you need to consider what type of annuity you want to best suit your situation (married or single) and your state of health (family history). If you are in poor health then an annuity (even an impaired lives annuity) may not be the best investment. An ARF may be better (because on your death any capital remaining in the fund can form part of your estate). If however your life expectancy is above average, then an Annuity may be worthwhile. It offers income certainly without having to take specific investment risk.

If you already have a "guaranteed" DB pension, then the ARF route may be worth looking at so as to hedge you pension bets.

But I suggest you seek professional advice.
 
Different insurers offer different rates, so you need to shop around. There is no central place where you can get all of the rates offered by all insurance companies, you have to see what all the companies offer.

The insurance company tells you at the outset what you are guaranteed to be paid. You don't worry about fund performance, that is the insurance companies risk. That is why they take a low risk approach and invest in long dated bonds, which currently give a low return, so the rate you get is also low.

Indexed annuities usually take 25 years to pay out more than a level annuity (amount never changes), so you need to bear that in mind when buying an annuity.

As Conan mentioned, an ARF may be worth considering. This is an investment like your AVC's, but you can access the money (and pay tax on any withdrawals). Unlike an annuity which is guaranteed for life, you are in control, so if you blow the money or invest badly, the money is gone. If there's still money in the pot when you die, it goes to your family. With annuities, the remainder is used to pay those who live too long!

Steven
www.bluewaterfp.ie
 
Thank you. O.K. Can I ask?

If I put €50k in an annuity with no strings or bells or guarantees attached, just on my own life at say 65, what would the expected return per annum be approximately?

If I put €50k in an annuity with a guaranteed 5 year payout on my life what would be the expected return per annum?

If I put €50k in an annuity with a guaranteed payout on me plus a payout to my spouse if I died, what would the expected return per annum be?

I am just trying to figure out how much the cost of the "additions/enhancements" will be to the payout. (Choosing Irish Life or similar).

I will come back to the ARFS once I get my head around annuities.

Thanks
 
I need the following:

Are you a male or female
Your date of birth?
Your spouse's date of birth?
How much do you want your spouse to get of your pension when you die? Anywhere from 1% to 100%
How much is your AVC pot?


Steven
www.bluewaterfp.ie
 
See payouts below:

If I put €50k in an annuity with no strings or bells or guarantees attached, just on my own life at say 65, what would the expected return per annum be approximately? €1,947

If I put €50k in an annuity with a guaranteed 5 year payout on my life what would be the expected return per annum? €1,942

If I put €50k in an annuity with a guaranteed payout on me plus a payout to my spouse if I died, what would the expected return per annum be? €1,702


Steven
www.bluewaterfp.ie
 
If I put €50k in an annuity with no strings or bells or guarantees attached, just on my own life at say 65, what would the expected return per annum be approximately? €1,947

Thanks for that Steven. So at age 85 (20 years later) I will have received circa €39,000 of my €50,000 investment and If I die during that period what happens to the capital sum?
 
Thanks for that Steven. So at age 85 (20 years later) I will have received circa €39,000 of my €50,000 investment and If I die during that period what happens to the capital sum?
If you have an annuity which covers as well your wife she will get a part of what you got. If you bought an annuity just for yourself the money is gone.
ARFs are part of your estate. Annuities not.
 
If you die early, the money pays for those who live too long. If you life too long, you're quids in.

With the ARF, you invest as like your AVC. You can invest in a range of different assets. You can take it all out in one go if you want or take the minimum of 4%. If you die early, your estate gets the ARF. If you live too long, you may run out of money. As you have a DB pension which is probably your main source of income in retirement, this may not be an issue anyway.

Steven
www.bluewaterfp.ie
 
Thanks. The annuity does not seem like a good deal at all. At 85 I haven't got my money back. It seems I only get my own €50k back by age 91.
O.K. Can we have a look at ARFs. Who do I approach to start one of these rolling? Is it the same insurance companies or stockbrokers that deals with the annuities?
Can I purchase specific shares like CRH or Tesco or similar as part of my ARF and if so how quickly are the purchases executed?
 
Yes, insurance companies and stockbrokers offer them. You have to be regulated by the Central Bank to offer ARF's. You can invest in funds and you can buy direct shares too. Most insurance companies are funds only. The trades are placed when you ask for them. It's better to buy indexed funds that track the market. You get the benefit of diversification that is difficult to get when you are buying individual stocks.

Also, do you put the research in before choosing what stock to pick or are you just taking a punt?

Steven
www.bluewaterfp.ie
 
See payouts below:

If I put €50k in an annuity with no strings or bells or guarantees attached, just on my own life at say 65, what would the expected return per annum be approximately? €1,947

If I put €50k in an annuity with a guaranteed 5 year payout on my life what would be the expected return per annum? €1,942

If I put €50k in an annuity with a guaranteed payout on me plus a payout to my spouse if I died, what would the expected return per annum be? €1,702

Why would anyone give their money to an Insurance Company and then wait over 20 years to get their own money back in annual amounts? If they die in the meantime they lose the entire amount. (Option 1 above). Would it not be better to stick it in An Post Savings Certs and instead of getting €1900 per annum, get half this amount in interest. At least you retain ownership of the capital, interest rates might increase, you can spend some of it as needs be and you can leave it in your will to whoever?

Once you put funds in an annuity are you locked in?
 
You can invest in funds and you can buy direct shares too. Most insurance companies are funds only. The trades are placed when you ask for them

Thanks Steven. Back in the day I used a stockbroker to purchase shares. You would phone them up and maybe 3 days later they would have purchased the shares for you.

When the internet came along I had a different stockbroker. I would research my shares, have a look at the "live" price online, ring my stockbroker and execute the share there and then. I would actually see my purchase happen online. No waiting around.

I could have kept my costs down by trading online myself but I liked the idea of getting a share certificate in the post.

It concerns me somewhat that if I want the company holding my ARF funds to invest in a particular share they will be like the stockbroker of old and take forever to make the purchase. For example. When Trump became president the price of CRH jumped by £4 + to £30.29 at it's highest point. Today it's £28.20 as I write. If I had contacted my ARF holder to purchase CRH on the day would they act immediately and make the purchase or do they take their time? I would be interested in hearing about this side of things.

Do insurance companies or stockbrokers offer a better service and do both have similar costs?
 
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